Company sees revenue growth

Mr. Memar, president of Medac Inc., does not lament that last year his anesthesiology billing company was investigated by both the FBI and the Internal Revenue Service. Though he says competing billing companies and former Medac employees misled federal authorities into confiscating hundreds of thousands of medical records from his Scott Nixon Memorial Drive office, he says he is not seeking revenge.

Medac officials freely discuss the federal investigators raid of their 180-employee Augusta office Jan. 26, 1998. The last of the seized records were returned to Medac in December, Mr. Memar said.

Although the ordeal appears to be over, federal investigations are never truly closed unless the government presses charges. Mr. Memar says Medac has nothing to hide.

According to the U.S. attorney's office, health care fraud is on the rise, and making sure insurance companies are not overcharged is being handled increasingly through federal investigations.

The Department of Health and Human Services increased convictions of health care fraud and abuse by 20 percent in 1997 and by an additional 16 percent in 1998. The Department of Justice also reports that successful legal action against fraud and other crimes in the health care field has increased by more than 240 percent since 1992.

Mr. Memar and his company have been convicted of no wrongdoing. And, Mr. Memar said, avoiding fines and criminal charges after 11 months of working around federal agents is almost as good as never having been investigated. In spite of the ordeal, Medac reports increased profits this year.

The company survived its run-in with the government, but there still were big consequences.

A great loss

Mr. Memar holds a single grudge: the belief that had the federal investigation never occurred, his older brother's life may have been spared. Kam Memar not only was his brother and best friend, but also his business partner.

On May 1, 1998, Kam Memar, 41, was driving to Birmingham, Ala., where bankers were waiting to extend a line of credit for Medac in case revenues were affected by the negative publicity of the investigations. Mr. Memar, co-founder of Medac, was in a fatal car accident, however.

Despite the months that have passed since Kam Memar's accident, his Augusta office looks the same as the day he left for Birmingham.

Family photographs still hang on the walls. A pair of sunglasses perches on the edge of his desk; his chair is slightly pulled out from behind it.

One might expect the phone to ring any minute. Mr. Memar says it will stay that way. He can't bring himself to change it.

Almost six months to the day after Kam Memar died, the last of Medac's confiscated records were returned to the company.

"We have been advised that the government's investigation has concluded without the initiation of any charges against Medac," stated a prepared statement from Robert F. Schroder, the attorney representing Medac.

The U.S. attorney's office will neither confirm nor deny that Medac has been investigated. The IRS also refused to comment.

"Until any kind of investigation gets to the point where we can complete it, that is the response we have to give," said Dan Drake, a law enforcement coordinating committee member with the U.S. attorney's office.

And a case that appears to be closed can be reopened at any time, he said.

The government started putting safeguards up to try to catch up to the problem of health care fraud in the 1980s, Mr. Drake said. Since then, the number of medically affiliated companies being investigated has mushroomed, he said.

He attributes increases to a new, heightened awareness of health care fraud, both by patients and industry insiders.

"People on the street are beginning to pick up on it," he said. "Plus, you've got competitors who are watching you as closely as you're watching them."

And automation allows billing companies to serve more clients than ever, which also increases the chance for error. Medac alone deals with more than 4,000 insurance companies and works with medical practices in 22 states, each of which has different laws pertaining to billing practices.

Back to business

Kam Memar's office is one of the few things that have remained unchanged at Medac since the investigation began nearly 1 1/2 years ago.

The company's revenue grew 23 percent in 1998. John Memar says he lost only one client as a result of the federal investigation. And Medac's revenue is on track to grow an additional 55 percent in 2000.

As the company grows, it is integrating a computer software program that Medac says practically eliminates the element of human error in billing procedures. The program monitors and guides how anesthesiologists charge insurance companies.

The software, which was developed by Kam Memar for five years at a cost of more than $3 million, will be in 70 percent of Medac clients' offices by July. It has been commemoratively named the KAM2000.

The program also gives clients real-time access to billing procedures.

Looking ahead

Medac employees have said all along that the company is compliant with all state, federal and local laws. And now that the company appears to have emerged without legal proceedings or federal fines, Mr. Memar said the investigation, in some ways, will help propel his company's profitability: The agents came and went, and Medac escaped unscathed. He said his clients are impressed.

"The IRS and FBI agents were extremely professional," he said. "It was something they had to do."

Compliance continues to be a priority at Medac, Mr. Memar said. Of the $9 million in revenue Medac expects to bring in this year, at least $300,000 will be spent on compliance efforts, such as training data-entry workers to catch potential errors.

"We never take any shortcuts, and we never quit spending money on compliance," he said. "If it wasn't for that, we wouldn't have been able to walk away from this (investigation)."

During the year of the investigation, Mr. Memar's hair turned from jet black to salt-and-pepper gray. He describes the experience as the worst of his life.

But his brother's memory inspires him, he says. And the same ethic that keeps Mr. Memar from altering his brother's office will keep him from ever selling Medac, he said.

"We've made things into a positive here," Mr. Memar says. "This investigation has turned business around for us. ... Life is getting back to normal."

Heidi Coryell covers business for The Augusta Chronicle. She can be reached at (706) 823-3215.